50 Exemptions and a Billion Questions for Nigeria’s Tax Future, by Adebisi Adams Oyeshakin
The new tax reform in Nigeria is not just about who will pay—it is also about who will not. In a move that blends compassion with calculation, the Federal Government has introduced 50 tax exemptions and reliefs under the wider reform agenda announced on 3 November 2025.
The measures, which take effect from 1 January 2026, offer low-income earners, small businesses, and critical sectors a reprieve from the heavy burden that has long defined Nigeria’s tax system.
The initiative forms part of the broader Nigeria Tax Act, signed into law in June 2025, which also established the Nigeria Revenue Service and the Joint Revenue Board to replace overlapping agencies and streamline tax administration across the federation.
These exemptions are the government’s way of saying, “We hear you.” They target those at the base of the economy and sectors that power production and innovation. Yet, as with most policies that promise relief, gratitude often shares space with suspicion.
Are these exemptions a genuine attempt to ease hardship, or are they a political strategy to build goodwill ahead of stricter enforcement next year? The exemption list, signed in early October 2024, covers categories ranging from basic food items, medical products, and educational materials to small-scale enterprises earning below a defined income threshold.
It also shields pension funds, charitable organisations, and certain agricultural sectors from direct taxation. In simple terms, the government wants to keep daily essentials affordable while ensuring that productive industries are not overburdened. It is an effort to balance fiscal responsibility with social protection—a delicate act in a fragile economy.
Nigeria’s tax-to-GDP ratio remains one of the lowest in the world—hovering around 10 percent, compared to an African average of 16 percent and an OECD benchmark above 30 percent. The reform and its exemptions seek to change this by encouraging voluntary compliance rather than coercion.
The reasoning is simple: when citizens believe that their taxes are fairly assessed and wisely spent, compliance grows. When trust breaks, evasion follows. Among the 50 exempted categories, notable inclusions are staples such as rice, beans, cassava, and maize.
Pharmaceuticals, books, educational materials, and sanitary products also remain free of tax. Non-profit organisations working in education, health, or poverty alleviation retain their status. Micro and small enterprises earning below 25 million naira annually are exempt from corporate income tax, while pension incomes and savings stay protected.
The design is clear—to cushion the vulnerable, sustain welfare, and stimulate productivity among low-income citizens. Still, serious questions linger. Long before the 2025 reform, analysts had warned that exemptions could open loopholes for abuse.
A 2024 report by the Chartered Institute of Taxation of Nigeria (CITN) revealed that once certain goods become exempt, some importers and producers reclassify unrelated products to qualify. BudgIT’s Fiscal Responsibility Review of August 2024 also flagged weak oversight and possible revenue leakages from unmonitored exemptions.
The IMF’s 2024 Article IV Consultation on Nigeria urged the adoption of digital monitoring and regular policy reviews to prevent misuse. The challenge, therefore, is not merely granting exemptions but tracking them with precision. Digital verification and transparent reporting must become routine, not exceptions.
Without them, even the best-intentioned reforms risk collapsing under their own weight. Elsewhere, other nations have learned this lesson. In Kenya, exemptions are linked to productivity and reviewed periodically. South Africa maintains a public registry of all beneficiaries. The United Kingdom employs a “sunset clause,” automatically revisiting exemptions after a set period.
Each approach reinforces accountability while keeping policies flexible. Nigeria would benefit from adopting similar safeguards to ensure its exemptions serve their true purpose.
The social impact of these exemptions cannot be overstated. For families already stretched by inflation and rising living costs, removing taxes on food and educational materials will bring relief. For small business owners, it provides room to reinvest earnings instead of being stifled by bureaucracy.
Yet, beyond immediate comfort, the greater test lies in how well the government communicates and enforces the new rules. Clarity builds trust; confusion destroys it. A deeper challenge lies in the long-standing trust deficit between Nigerians and the state. For years, citizens have been told that paying taxes guarantees better infrastructure, education, and healthcare.
Yet many communities continue to depend on self-help projects and local initiatives. If exemptions exist only on paper, the reform loses both moral weight and public confidence. Accountability must, therefore, extend beyond tax collection to how revenues are used. Citizens deserve to know not only what is exempted but how forgone revenues are replaced—and where every collected naira goes.
Globally, taxation works best where a visible social contract exists. In countries such as Canada and Germany, taxpayers can trace the impact of their contributions in quality public services. The Nigerian government has begun to acknowledge this gap. The Finance Ministry’s recent directive for transparent spending reports is a step forward, but it must become standard practice rather than a symbolic gesture.
Economic stability also demands vigilance. A narrow tax base forces greater reliance on oil and foreign borrowing, both of which expose the country to external shocks. With targeted exemptions and stronger accountability, Nigeria can gradually expand its non-oil revenue base without suffocating its citizens. Sustainable reform, not blanket taxation, remains the path to progress.
In the end, the 50-item exemption list represents both relief and responsibility. It shows a government attempting empathy in policy design while testing its administrative discipline. For citizens still within the tax net, it is an invitation to demand fairness and efficiency. For those exempted, it is a reminder to respect the integrity of the system and discourage abuse.
The success of this reform depends on mutual honesty. The government must prove that empathy in taxation can coexist with discipline in spending. Citizens, in turn, must see taxation not as punishment but as partnership. Accountability remains the bridge between both sides—and without it, no reform, no matter how generous, can endure.
*Adebisi Adams Oyeshakin, a PRNigeria Fellow, writes via: [email protected].*